FTSE 100-listed Rolls Royce Holdings PLC (GB:RR) has secured a massive £9 billion ($11 billion) deal to power UK submarines with nuclear reactors. This marks the company’s largest-ever contract signed with the UK’s Ministry of Defence. The eight-year deal, called Unity, involves the design, production, and ongoing support services for nuclear reactors that power the country’s fleet of submarines. Rolls-Royce shares gained 0.20% as of writing.
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Rolls-Royce specializes in designing engines and power systems for the aerospace and defense sectors.
Major Win for Rolls-Royce
The deal is a major win for Rolls-Royce, further strengthening its Defence segment. The company already has a significant presence in naval operations, supporting the nuclear propulsion systems for all of the UK Royal Navy’s nuclear submarines. Additionally, this deal is excellent news for the UK as a whole, with more jobs in the country and an opportunity to highlight British innovation globally.
Overall, the new contract covers comprehensive support for the existing submarine fleet, ongoing development of the Dreadnought-class submarines, and the initiation of the SSN-AUKUS program, which is a key component of the UK’s nuclear defense strategy. In March 2023, it was revealed that Rolls-Royce would supply the reactors for the new fleet of nuclear submarines as part of AUKUS.
The AUKUS agreement is partnership between Australia, the UK, and the U.S., to strengthen defense capabilities and enhance security for all three nations in the long run.
Insights from TipRanks’ Bulls Say, Bears Say
TipRanks’ Bulls Say, Bears Say tool provides a comprehensive summary of analysts’ perspectives on RR stock, showcasing optimistic and cautious outlooks.
Bulls remain confident in Rolls-Royce’s ability to meet its guidance, with expected 2024 operating profit of £2.1- £2.3 billion and free cash flow of £2.1- £2.2 billion. Additionally, demand in the company’s Civil, Defence, and Power Systems sectors is expected to remain strong.
Bears, however, remain cautious due to ongoing supply chain issues and regulatory challenges in the industry.
Is RR Stock a Good Buy?
According to TipRanks, RR stock has received a Moderate Buy rating based on six Buy and three Hold recommendations. However, analysts see limited growth potential compared to the significant increase observed over the past year.
Over the last 12 months, RR stock has gained nearly 100%.
